Indian Red Cross Society Vs Commissioner of C E & S.T. (CESTAT Chandigarh)
Summary: The CESTAT, Chandigarh considered an appeal filed by M/s Indian Red Cross Society against the order of the Commissioner (Appeals) confirming service tax demand of Rs. 12,94,980/- for April 2005 to March 2009, along with interest and penalties. The Department treated the Society’s assistance to the Registering and Licensing Authority, Chandigarh, as manpower recruitment or supply agency service and also demanded tax on first-aid training provided to students and employees of various organisations. The Society contended that it was a welfare and voluntary organisation functioning on a no-profit-no-loss basis and that, under its “Sahayata Project”, its staff assisted the RLA office in issuing driving licences and registration certificates.
It received a fixed share of statutory fees on a per-case basis and retained control over its staff. The Tribunal found that the Society was a welfare and voluntary organisation and did not fall within the definition of a commercial concern required for levy of service tax under the manpower recruitment and supply agency category. The Tribunal also held that the first-aid training provided to students and colleges did not fall within Commercial Training or Coaching Service for the relevant period. It noted that the training formed part of the Class 9 health education syllabus prescribed by CBSE and only nominal fees were charged.
The Tribunal further considered the limitation issue and held that suppression could not be alleged against the non-profit Society functioning under the direct control of the Deputy Commissioner of Chandigarh. Since the adjudicating authority had itself dropped the penalty under Section 80 of the Finance Act, 1994 after observing that the extended period could not be invoked, the normal-period demand also could not survive. Relying on Shaym Spectra Pvt. Ltd. Vs Commissioner of Service Tax, the Tribunal held that the liability for the normal period would also go once the extended period could not be invoked. Accordingly, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with law.
Cases Discussed
- S.S. Associates Vs CCE, Bangalore, 2010 (19) S.T.R. 438 (Tri.)
- Shaym Spectra Pvt. Ltd. Vs Commissioner of Service Tax, Appeal No. ST/50583/2017, decided on 31.07.2024 by the CESTAT, Delhi
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT, CHANDIGARH
The present appeal is directed against the impugned order dated 19.12.2012 passed by the Commissioner (Appeals), whereby the Commissioner (Appeals)has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that during the course of enquiry with the Registering and Licensing Authority, U.T.. Chandigarh it was gathered that the preparation of Driving Licenses, Registration Certificates of Vehicles etc were outsourced to the staff employed by the appellant. On specific query regarding the nature of work being done by the appellant, the appellant explained that they provide manpower by recruiting Data Entry operators, peons, sweeper to do the clerical work including typing on the computer in preparation of Licenses and registration of vehicles etc. They further informed that they were also providing services under the category of Commercial Training and Coaching by providing first aid training to the students of various schools and colleges as well as employees of various organizations on nominal fee. The appellant were asked to submit the details of amount received by them. On the basis of information provided by the appellant, a show cause notice for the recovery of service tax amounting to Rs.12,94,980/- for the period April, 2005 to March, 2009 was issued by invoking the extended period. The appellant were also issued show cause notice for recovery of interest and imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994. After following the due process, the adjudicating authority confirmed the demand of Rs. 12,94,980/- along with interest vide its order dated 18.06.2010 and also imposed penalty under Section 76 & 77 and dropped the penalty under Section 78. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) who rejected their appeal; hence, the present appeal.
3. Heard both the parties and perused the record.
4. Ld. Counsel for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submits that the appellant is a Welfare & Voluntary Organisation created under the Indian Red Cross Society Act, 1920 and the Deputy Commissioner (DC) of Chandigarh is also Chairman of the appellant. He further submits that there is acute problem in issuance/preparation of Driving Licenses and Registration Certificates of Motor Vehicles in the RLA Office due to shortage of skilled staff and of adequate infrastructure which is resulting inordinate delay in issuing the said documents. In view of this, the Deputy Commissioner, Chandigarh decided that the appellant would assist the Registering/Licencing Authority in issuing driving licenses, registration of motor vehicle certificates, transfer of motor vehicle certification etc. under a project known as “Sahayata Project” launched by the appellant. Under this project, the appellant was to assist the RLA office in their discharge of their official duties in lieu of that, a share out of fees fixed for issuance of Driving Licences/Registration Certificates of vehicles was to be paid to the appellant as a lump-sum amount on per case basis. The staff was working on the rolls of the appellant and was to work as per their directions.
4.2 Further, he submits that the appellant was working on no profit no loss basis. But, the department has wrongly assumed that the appellant are providing “Man Power Recruitment and Supply Services” to the RLA and confirmed the demand by both the authorities. He further submits that the appellant has also provided First Aid Training to the students of various school and colleges as well as employees of various organizations on receipt of nominal fee as fixed by the National Head Office and the Department has demanded the service tax under the category of Commercial Training and Coaching Service.
4.3 He further submits that the Commissioner (Appeals) has wrongly presumed that the appellants have provided Man Power Recruitment and Supply Services to the RLA because the RLA office is a Government Department of the U.T. Chandigarh and is engaged in performing official duties of Registration of vehicles, issuing of driving licenses etc. and these activities are performed as statutory obligation by receiving a nominal statutory fee from the concerned person. He further submits that out of this nominal fees charged by the registering authority a nominal amount as fixed by the Deputy Commissioner was paid on per case basis to the appellant. He further submits that registering and licensing authority has no control over the staff provided by the appellant and the payments in lieu of the activities performed by the staff of appellants were not paid as per number of persons deputed for the purpose but the amount was paid as per rate fixed per item/job by the Deputy Commissioner, U.T. Chandigarh. He further submits that this kind of an arrangement cannot be described as a provision of Man Power Recruitment of Supply Agency. In support of his submissions, he relied upon the judgment of the Tribunal in the case of S.S. Associates Vs. CCE, Bangalore reported in 2010 (19) S.T.R. 438 (Tri.).
4.4 He further submits that the appellant is not a Commercial concern for the purpose of charging of service tax during the impugned period. He also submits that the Revenue has failed to prove that the appellant is a Commercial concern whereas in fact the appellant is a non-commercial concern and the same is not covered under ambit of Man Power Recruitment or Supply Agency Service during the period from April 2005 to 17.04.2008. He also submits that the activities performed by the appellant are statutory in nature as clarified vide Circular No. 89/7/2005-ST dt. 18.12.2006 and they have been paid only a share of the fees charged from the public for performing activities which are required to be performed by the registering and licensing authority. Ld. counsel also submits that the Ld. Commissioner (Appeals) has confirmed the demand under the Commercial Training and Coaching Service by mis-interpreting the definition of Commercial Training or Coaching Service given in Section 65(105)(22c) of the act vide Finance Act, 2010 retrospectively by way of inserting an explanation, by virtue of which all organizations providing training or coaching service for a consideration would be subject to service tax irrespective of the fact whether they are carrying out business with the profit motive or not.
4.5 Ld. Counsel further submits that the appellant has provided “First Aid” Training to the students of various schools and colleges of U.T., Chandigarh, which is a part of their syllabus under the “Health Education of class 9th as prescribed by CBSE”. He further submits that only a nominal fee was charged from such schools/colleges for providing the said trainings to their students. Ld. Counsel also submits that the impugned order is barred by limitation as the appellant is a Government body whose Chairman is a Deputy Commissioner and suppression of facts with intend to evade tax cannot be alleged against them. He also submits that the demand upto the period March, 2008 is time barred, as the show cause notice was issued on 26.08.2009. He also submits that the adjudicating authority refrained from imposing penalty under Section 78 by invoking Section 80 on the ground that there was dispute regarding leviability of tax and did not invoke the extended period of limitation.
5. On the other hand, Ld. AR reiterated the findings of the impugned order.
6. After considering the submissions of both the parties and perusal of the material on record, we find that the appellant is admittedly a Welfare & Voluntary Organisation created under the Indian Red Cross Society Act, 1920 and the Deputy Commissioner (DC) of Chandigarh is the Chairman of the said society. We also find that the appellant only provides temporarily the Man Power to registration and licesensing authority for the purpose of expedition of issuance of Driving Licences and Registration Certificates of Motor Vehicles in the RLA Office where there is an acute shortage of staff. We also find that the appellant is paid a fixed share out of the fees for issuance of Driving Licences/Registration Certificates of vehicles as a lump-sum amount on per case basis. We also find that the appellant has full control over the staff provided by them; we also find that the appellant does not fall in the definition of Commercial concerns as is required in order to charge service tax under the category of Man Power Recruitment and Supplies Agency Service.
7. As regards providing first aid training to the students of the schools and colleges, we find that this also does not fall in the definition of Commercial Coaching/Training, we also find that w.e.f. 10.05.2008 the words “to the client” used in Section 65(105)(k) have been substituted by “to any person”. The Government is not covered by the terms “person”. Further, the definition of “person” was amended only in 2012 to include Government but the period involved in the present case is prior to 2012, therefore, the service provided to the Government will not be covered in the term “to any person” and therefore will not be taxable. We also find that the first aid training to the students is a part of their syllabus of health education for class 9th prescribed under CBSE and only a nominal fees is paid by the students.
8. As regards the limitation, we find that suppression cannot be alleged against the appellant which is a non-profit making society working under the direct control of the Deputy Commissioner of Chandigarh and the adjudicating authority has also dropped the penalty under Section 80 by observing that extended period cannot be invoked; therefore, once the extended period cannot be invoked, the liability for the normal period will also go as held in the case of Shaym Spectra Pvt. Ltd. Vs. Commissioner of Service Tax in Appeal No. ST/50583/2017 decided on 31.07.2024 by the CESTAT, Delhi.
9. In view of our discussions above, the impugned order is not sustainable in law and thereafter, we set aside the same by allowing the appeal of the appellant with consequential relief if any, as per law.
(Order pronounced in the open court on 05.03.2025)
